KPMG UK comments on today's labour market figures

“Rise in pay growth expected to be short lived as labour market faces headwinds” says Yael Selfin, Chief Economist at KPMG UK.

Rise in pay growth expected to be short lived as labour market faces headwinds

“While unemployment rose to 4.4%, it remained fairly low in the three months to November. Pay growth ticked up to 5.6%, but this was largely due to base effects. We expect pay growth to trend downwards over the coming year, with the backdrop of slowing labour market activity.

“Forward looking indicators suggest a significant weakening in hiring intentions due to the upcoming tax rises in April. We expect this to act as a headwind for labour market activity in the near term, likely translating into a small pick up in headline unemployment over the coming months. Nonetheless, once the impact of the Budget passes together with the expected improvement in economic activity, conditions should stabilise in the labour market.

“Wage growth is expected to return closer to levels consistent with the inflation target this year, despite the recent increase. The rise in business costs due to the Budget measures should have a cooling effect on labour market activity and make higher wage settlements less likely. As a result, it is anticipated the Bank of England will opt for an interest rate cut next month, and two further rates cuts in 2025.”

 

-ENDS-

 

For media enquiries, please contact:

Gerard Swinley, Corporate Communications
Tel: +44 (0) 20 3078 3948
Mob: +44 (0) 7510 375540
Email: 
gerard.swinley@kpmg.co.uk

KPMG Press Office
Tel: +44 (0) 207 694 8773 

 

Notes to Editors:

About KPMG

KPMG LLP, a UK limited liability partnership, operates from 20 offices across the UK with approximately 18,000 partners and staff. The UK firm recorded a revenue of £2.96 billion in the year ended 30 September 2023.

KPMG is a global organisation of independent professional services firms providing Audit, Legal, Tax and Advisory services. It operates in 143 countries and territories with more than 273,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.

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